Certified Government Financial Manager (CGFM) Practice Exam 2025 - Free CGFM Practice Questions and Study Guide

Monetary policy is the correct choice because it specifically involves the management of a country's money supply and interest rates, primarily conducted by the central bank—such as the Federal Reserve in the United States. This policy aims to control inflation, stabilize currency, and manage employment levels by adjusting the amount of money in circulation.

In contrast, fiscal policy pertains to government spending and tax policies, which are used to influence the economy but do not directly establish the money supply. Regulatory policy involves the rules and regulations that govern various sectors to ensure fair practices, and trade policy focuses on international trade relations and tariffs rather than domestic money supply. Understanding the distinction between these policies helps clarify the specific role of monetary policy in economic management.